Moody’s Gives ‘Average’ Rating to Finance of America Reverse Jumbo Business

Moody’s Investors Services assessed Finance of America Reverse (FAR) as an ‘Average’ jumbo reverse mortgage loan originator. This is the first time that Moody’s has assessed a reverse mortgage originator.

For this assessment, Moody’s focused on FAR’s origination of proprietary jumbo reverse mortgage from October 1, 2014, when FAR originated its first HomeSafe mortgage, to June 30, 2016. During this time, the company originated 154 HomeSafe loans with an aggregate original loan balance of $136.4 million, according to Moody’s analysis.

The strongest features of FAR’s jumbo program were found to be property valuation, technology and legal regulatory compliance. Each category was found to be “Above Average”.

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The weakest features were found to be FAR’s financial strength, management strength and staff quality, and quality control and audit functions. Financial strength and quality control and audit functions were found to be “Weak.” Management strength at FAR was found to be “Below Average” due to the company’s high turnover rate.

Even though FAR’s management has significant experience in the mortgage industry, many of their mid-level managers have been with the company for under four years.

The assessment was based on FAR’s loan performance and originator ability. This included analyzing FAR’s ability to accurately assess borrowers’ willingness and ability to meet their reverse mortgage payment obligations such as, keeping up with taxes and insurance payments on their homes.

Also taken into consideration was FAR’s ability to accurately and objectively assess property values, the company’s ability to originate loans while upholding laws and regulations of the industry and its financial strength.

FAR’s HomeSafe mortgages are single draw, fixed-rate mortgages and are offered to wealthier borrowers. These borrowers have a loan limit of $2.25 million, instead of the Home Equity Conversion Mortgage loan limit of $625,500.

Written by Alana Stramowski

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  • The post states: “These borrowers have a loan limit of $2.25 million, instead of the Home Equity Conversion Mortgage loan limit of $625,500.” But is that true?

    It is my understanding that the $2.25 million is not loan limit as with HECMs but rather the maximum loan proceeds a borrower can obtain with the jumbo reverse mortgage. With the HECM, the loan limit is simply the maximum value that can be used in computing the maximum available loan proceeds a borrower can obtain which is less than $500,000 even at 99 years old.

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